Moody's assigns Odfjell, notes B2

Moody's Investors Service said it assigned new ratings to Odfjell Drilling Ltd., including a B2 corporate family rating, a B2-PD probability of default rating and a B2 instrument rating to the planned $390 million of backed senior secured notes due 2028 to be issued by ODL's indirectly wholly-owned subsidiary Odfjell Rig III Ltd. The ratings outlook is stable.

In explaining the B2 rating, Moody’s noted ODL’s history, high quality and young fleet, an improving deep-water drilling market and as of May 2023, a $1.7 billion backlog. However, limiting the rating reliance on upstream oil and gas spending given its focus on drilling services, its small fleet and that it has only two customers.

“ODL’s financial metrics are strong for the B2 rating category. The focus on remunerative harsh environment drilling activities coupled with sustained high rig utilization resulted in Moody's-adjusted EBIT margins consistently above 17% on a historic basis,” Moody’s said in a press release.

ODL will use the proceeds to refinance a portion of its and for general corporate purposes.

“The stable outlook reflects our expectation that ODL will maintain strong credit metrics by successfully re-contracting its rigs, generating sufficient free cash flow to satisfy debt servicing requirements,” the agency added.

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